Pandora (NYSE:P) the stock has been volatile. Most recently it has ranged from $15 to $10 and back again. Competing visions for the stock remain in negotiation, and I have covered both sides. As I expect reduced volatility in my darling Zynga (NASDAQ:ZNGA), I am now making the opposite prediction for Pandora . I suggest you consider buying volatility in Pandora shares.
The backward-looking advice of Spencer Osborne forms the basis of my call.
I have seen it as a buy under $11, and a sell at about $15. That represents a nice trading range.
This is the kind of thinking that gets you burned when the range breaks. And make no mistake, Pandora will break the range, one way or the other. We're going to find out, sooner rather than later, how sustainable the business model is. We're going to find out whether or not Spotify (Facebook (NASDAQ:FB) partner) Apple (NASDAQ:AAPL) Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) will cut into Pandora's main arteries of cash. Even if the answer is not conclusive, an indication of the final answer will send shares sub $8 or supra $18 within 6 months of today. So don't count on the range.
Let's go over what has happened in music the last few days, just to illustrate how dynamic the field is. Google rolled its music service into a broad "fun" category, which in theory encourages use of Google Music on all mobile devices, including the iPhone, which has been a boon to Pandora. Apple, whose hardware encourages use of iTunes for music, is shipping so much hardware from China that it's raising the freight price. Amazon's AWS supports cloud solution companies, and Gartner just said clouds will provide storage for 90% of devices by 2015--with Amazon continuing to improve its hosting value proposition, there is little doubt it will ensure the cheapening of music distribution.
There is emerging life in the space of music, and with life should come real volatility, one way or the other. Spotify remains the most significant of players--it is becoming an OS for music, and threatens to turn Pandora into one of many apps. That said, Zynga has done okay on the Facebook platform, so maybe Pandora will find itself in a cozy home at Spotify.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.